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ae7943
Level 2

Roth IRA earnings on excess contributions: amend early?

I withdrew in early 2020 some excess Roth IRA contributions made in and for 2019, and corresponding earnings on this contribution, but I did not include the taxable earnings in my 2019 tax return. So I need to amend this return.

 

I read elsewhere on this forum that one usually files the amended return when the 1099R is received the following year.

 

However, since I already know the content of box 1 and 2a for the upcoming 1099R based on what my bank returned (and I confirmed the earnings amount independently using the Worksheet 1-4 formula in Pub. 590-A, so quite confident it is correct), I am wondering if  there is any caveat in filing an amended return now, with code J8 (in TT 2019 amendment software) , and then ignore the 1099R next year. 

 

Thanks. 

 

PS: I will also be removing 2017 and 2018 excess contributions later in the year (and file corresponding 5329 forms for the 6% penalty), but as I understand it that should not have any bearing on amending my 2019 tax return.

2 Replies
macuser_22
Level 15

Roth IRA earnings on excess contributions: amend early?


@ae7943 wrote:

 

 

if  there is any caveat in filing an amended return now, with code J8 (in TT 2019 amendment software) , and then ignore the 1099R next year. 

 


Yes there are.

 

1) There is no reason to amend before you receive the 1099-R and if the 1099-R is not what you think it will be then you will have to amend again  which is messy.

 

2) If you amend with a 1099-R code J8 then it would be incorrect and would require amending again.  Code J8 is not for a 2019 return of earnings returned in  2020.  It would probably be a code PJ.  (Code J8 on a 2020 1099-R says it is a 2020 contribution returned in 2020 and cannot go on a 2019 tax return).

 

3) If you did not specifically instruct the IRA trustee that this was a"return of excess contribution" and not just a normal distribution then the 1099-R might not be coded as  a return of contribution at all.

 

All in all, I never recommend amending before the actual 1099-R is received - there is no good reason to do so.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
macuser_22
Level 15

Roth IRA earnings on excess contributions: amend early?


@ae7943 wrote:

 

PS: I will also be removing 2017 and 2018 excess contributions later in the year (and file corresponding 5329 forms for the 6% penalty), but as I understand it that should not have any bearing on amending my 2019 tax return.


 

Note, if you do not know:

 

The 6% penalty repeats each tax year that is it in the IRA.

 

For the 2017 excess there will be a 2017 and 2018 and 2019 6% penalty,

and for the 2018 excess, a 2018 and 2019 6% penalty.

 

You need to file a 5329 for each year.

 

There will be no 2020 penalty if both excess are removed before the end of 2020 as a "normal" distribution of the excess only, not the earnings, which can remain because the penalty is paid.   There will be no tax on the distribution since it is your contributions - just the penalties.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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